The Castle Group, Inc. Announces Guidance for Q4 Fiscal Year 2007, and Fiscal Year 2008

  
    
  
  
    
      The Castle Group, Inc. (OTCBB:CAGU), holding company for Castle Resorts 
      & Hotels, which provides hospitality services to 26 properties in 
      Hawaii, Guam, Micronesia, New Zealand, and Thailand, today announced its 
      financial guidance for its fiscal 2007 fourth quarter and full fiscal 
      year, ending December 31, 2007.
    
    
      Management also announced guidance for fiscal year 2008, ending December 
      31, 2008.
    
    
      Since May 2007, Castle has added six new properties to its list of 
      hotels and condominium resorts, with the most recent additional 
      properties under Castle management being the 596-room Maile Sky Court 
      Hotel in Honolulu, Hawaii and the Queen Kapiolani, a 315-room hotel 
      located in the heart of Honolulu, with spectacular views of Oahu’s 
      two famous landmarks, Diamond Head and Waikiki Beach.
    
    
      Commenting on the Company’s year 2007 results, 
      Alan Mattson, president and chief operating officer of Castle Resorts & 
      Hotels, said, “We are closing out the year 
      very strongly and are on target for our growth objectives. Our presence 
      in Waikiki has more than doubled in the past year, and with our 
      expansion into Thailand, we are accelerating our international inventory 
      growth. Taken together, properties newly under contract are expected to 
      provide substantial increases in revenues, as compared to prior periods.”
    
    
      Preliminary Q4 and Fiscal Year 2007 Results
    
    
      Castle estimates that its revenues will total $22.6 million during 2007, 
      representing a year-over-year increase of 7% for 2007 as compared to 
      2006. This estimate is based on the Company’s 
      financial performance in the three quarters of fiscal 2007 and management’s 
      experience with the Company’s operations and 
      markets in recent past years, as well as the expected performance of new 
      contracts.
    
    
      Operating expenses are expected to increase 13% to $22.5 million during 
      2007, from $20.0 million in 2006. This increase in operating expenses is 
      partially a result of staffing and infrastructure costs incurred in 
      preparation for the commencement of new contracts but before related 
      revenues can be realized.
    
    
      Castle has made investments in its organization and infrastructure over 
      the past few quarters which have brought increases in cost efficiencies. 
      The incremental costs of managing new contracts and their associated 
      revenues are less than the cost of managing the historical revenue base.
    
    
      Castle expects full-year 2007 earnings before interest taxes, 
      depreciation and amortization (EBITDA) to total $338,000 and a net loss 
      on a GAAP basis of $162,000 versus the $1.3 million in EBITDA and 
      $372,000 in net income recorded for the year ended December 31, 2006. 
      The decrease in earnings is a result of the company’s 
      execution of its strategy to expand into other Pacific Basin and Asian 
      vacation destinations. Increases in staffing and enhancement of its 
      systems and infrastructure during the past year were undertaken in 
      anticipation of substantial growth in the number and geographical reach 
      of the properties under contract in the coming quarters.
    
    
      EBITDA, a financial measure not in accordance with generally accepted 
      accounting principles (GAAP), reflects Castle’s 
      earnings without the effect of depreciation, interest income or expense 
      or taxes. Castle’s management believes that 
      in many ways it is a good alternative indicator of Castle’s 
      financial performance as it removes the effects of non-cash depreciation 
      and amortization of assets, as well as the fluctuations of interest 
      costs based on its borrowing history and increases and decreases in tax 
      expense brought about by changes in the provision for future tax effects 
      rather than current income. Readers should be aware that not all 
      companies calculate EBITDA in the same way, potentially impairing EBITDA 
      comparisons from company to company.
    
    
      Due to the relatively fixed nature of the Company’s 
      interest, depreciation, and amortization, Castle’s 
      net income for the fourth quarter of 2007 is anticipated to follow a 
      trend similar to EBITDA. The Company is estimating a slight loss of 
      $27,000 in the fourth quarter of 2007 for a combined net loss of 
      $162,000 for the full year of 2007.
    
    
      Fiscal 2008 Guidance
    
    
      Incremental revenues from the Company’s new 
      contracts, along with expansion of services provided to resort and 
      condominium properties currently under contract, are expected to 
      increase 2008 revenues to $26.8 million, representing an 18% improvement 
      over 2007.
    
    
      Fiscal 2008 operating expenses are anticipated to total $25.0 million, 
      an increase of 11% over 2007, less than the anticipated 18% growth in 
      revenues noted above.
    
    
      Based on increased efficiency trends continuing into 2008, Castle is 
      projecting an increase in EBIDTA to $2.1 million. This represents five 
      times the EBIDTA estimated for 2007.
    
    
      Due to the relatively fixed nature of interest, depreciation, and 
      amortization, combined with projected revenue increases and operating 
      efficiencies, Castle’s net income for 2008 is 
      anticipated to follow a trend similar to EBITDA, and is projected to 
      total slightly less than $1.0 million.
    
    
      “This year marks some major accomplishments 
      for the Company. Not only have we substantially expanded our portfolio 
      of companies under management and turned towards profitability, we just 
      recently started trading on the Over the Counter Bulletin Board,” 
      said Rick Wall, chairman and chief executive officer of The Castle 
      Group, Inc. “Castle has entered a period of 
      rapid growth and we intend to continue our rapid growth in the coming 
      quarters by adding properties to our property management portfolio, 
      providing more and higher-value services to the property owners we serve 
      and leveraging the efficiencies we have woven into operations. The 
      properties in the portfolio for 2008 are expected to generate in excess 
      of $100 million in annual Gross Property Revenues for their owners.”
    
    
      Castle receives either fees or Attributed Property Revenues, (a portion 
      of Gross Property Revenues) and uses the measurement of overall Gross 
      Property Revenues, from all sources, as a metric to track the size and 
      scope of its portfolio growth.
    
    
      “Castle’s new and 
      existing business and contracts give management strong confidence in our 
      current projections for 2007 and 2008,” said 
      Howard Mendelsohn, the Company’s chief 
      financial officer. “Our planned and ongoing 
      new business acquisition activities may allow us to accelerate our 
      growth beyond the projections shown here for 2008 and continue that 
      trajectory into 2009.”
    
    
      About The Castle Group
    
    
      The Castle Group manages hotels and condominiums on the Hawaiian islands 
      of Oahu, Maui, Kauai, Molokai and Hawaii; on Saipan and Guam in 
      Micronesia; Thailand and on New Zealand’s 
      North Island. Founded in 1994 with just 220 rooms, today Castle has 
      contracts with 26 properties totaling more than 3,200 hotel rooms and 
      condominium units and employs more than 600 resort, hotel and corporate 
      staff. Castle offers travelers accommodations ranging from hotel guest 
      rooms to fully equipped spacious resort condominiums. Castle has adopted 
      a strategic plan to expand in Hawaii, Micronesia, New Zealand, and 
      Thailand, as well as in regions throughout the Pacific, Asia and Central 
      America.
    
    
      This press release contains forward-looking statements made under the “safe 
      harbor” provisions of the U.S. Private 
      Securities Litigation Reform Act of 1995. Forward looking statements are 
      based upon the current plans, estimates and projections of The Castle 
      Group's management and are subject to risks and uncertainties which 
      could cause actual results to differ from the forward looking 
      statements. These include, but are not limited to risk factors and 
      uncertainties set forth in the Company's Form 10-KSB/A-1 dated November 
      7, 2007 and other filings with the U.S. Securities and Exchange 
      Commission. The Castle Group does not assume any obligation to update 
      the information contained in this press release.